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Companies as Commodities

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Like copper, corn, or crude oil, companies increasingly trade like commodities. Some investors-certain holders of debt, activist shareholders, and controlling shareholders, especially private equity funds-are focused solely on returns. In practice, this means that they care about the fate of the companies in which they invest no more than they care about the fate of any tonne of copper, bushel of corn, or oil barrel they happen to trade. These investors are so immune to reputational concerns that they will even prefer that the companies in which they invest fail if failure maximizes their return on investment. This Article identifies and labels these going-concern-neutral ("GCN") investors. By virtue of their singular focus on return on investment, GCN investors are not bound by the same norms and relationships as other stakeholders in a company. This disconnect allows GCN investors to transfer an outsized share of company value to themselves. As a result, GCN investing typically increases the costs and risk faced by other stakeholders. This Article then uses property theory to understand GCN investing and the conflicts in the use of company value that it creates. Although it is contested whether GCN investors are properly understood as true owners of firms and their assets, accepting that premise to leverage the tools of property theory leads to significant insights. Analyzing these investors' ownership claims through an exclusion framework reveals unseen nuances in the relationships between GCN investors and other stakeholders. Next, four property-law concepts-the right to destroy, waste, nuisance, and the tragedy of the commons-provide a rich source of analogies. These analogies reveal that the law has long used a number of so-called "governancer ules" to manage property where there are several competing users. These rules restrict the rights of owners in order to address externalities and to promote welfare maximization. Although companies have been commoditized into mere property, the governance rules that restrict property ownership in other contexts do not yet apply to ownership of companies. It is time to consider interventions that would align the benefits and burdens of ownership of commoditized companies with ownership of other assets.

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